Asian stocks rebounded on Thursday, buoyed by positive sentiment from Wall Street, with investors eagerly awaiting key U.S. inflation data for insights into potential interest rate cuts. Japan’s Nikkei 225 continued its impressive run, extending gains and reaching a fresh 34-year high above 35,000 points.
Nikkei 225 Extends Rally to 34-Year High
Japan’s Nikkei 225 remained a standout performer in the region, rising 2% on Thursday to reach a multi-decade high. The index’s recent surge is attributed to expectations that the Bank of Japan will maintain its accommodative policy, especially following stimulus efforts in response to a recent earthquake in central Japan. The Nikkei was among the top-performing global stock indexes in 2023, recording a 30% annual jump.
Broader Asian Markets Advance on Tech Strength
Other Asian markets also saw gains, primarily driven by strength in regional technology stocks. Hong Kong’s Hang Seng rose 1.4%, led by a recovery in heavyweight tech shares. South Korea’s KOSPI added 0.2%, although signals from the Bank of Korea suggesting prolonged higher interest rates tempered larger gains. Australia’s ASX 200 increased by 0.4%, with positive sentiment towards the tech sector further boosted by December revenue data from TSMC, indicating potential recovery in chip demand.
China’s Markets Recover Mildly
China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes experienced mild recoveries from multi-year lows. However, sentiment towards China remained fragile ahead of upcoming economic indicators, including inflation and trade readings scheduled for Friday. Traders remained cautious, waiting for signals on the health of the Chinese economy.
US CPI Data Keeps Traders Cautious
Despite the overall positive trend in Asian markets, traders exercised caution as they awaited crucial U.S. Consumer Price Index (CPI) data. The data, expected later in the day, is anticipated to show a mild increase in headline inflation, while core CPI is projected to decrease. Traders are closely watching whether the data will influence the Federal Reserve’s stance on early interest rate cuts, given expectations that inflation will remain above the central bank’s 2% annual target.
The uncertainty over potential early interest rate cuts has been a significant factor contributing to losses in global stock markets since the beginning of 2024. Investors are keenly monitoring the CPI data for signals on the future direction of monetary policy and its impact on financial markets.